Sharing valuable insights from the two major sectors of electronic fabric and optical fiber.
The recent surge in fiber optic prices has drawn significant attention across the industry. Many mistakenly believe this price hike is a short-term speculative frenzy, but this is far from the truth. The fiber optic price increase cycle has already begun, with an average increase exceeding 600% since the end of last year. The long duration and substantial magnitude of the price increase indicate it is not driven by short-term sentiment.
Compared to the previous 4G and 5G construction cycles, the logic behind this round of fiber optic price increases has fundamentally changed. Currently, the scale of routine infrastructure bidding by the three major operators has significantly decreased, and construction efforts are far less than during the peak of telecommunications infrastructure development. The demand for traditional communication fiber optics has already peaked, and the industry's development landscape has been completely reshaped.
The core logic supporting the continued rise in fiber optic prices rests on two main points. First, it's a recovery rebound after a period of overselling. The fiber optic industry previously experienced a prolonged slump of three to four years, with product prices remaining low. Excess capacity was fully cleared, and valuations and prices were consistently undervalued. This deep adjustment has led to a retaliatory rebound, providing a solid foundation for price recovery. Second, the surge in demand from the AI computing power industry. Data center and computing cluster construction have become new growth drivers, with optical communication, as the core carrier of computing power transmission, experiencing continued demand for high-end products such as high-speed optical fiber and hollow-core optical fiber.
Industry leaders such as Yangtze Optical Fibre and Cable, Hengtong Optic-Electric, and Zhongtian Technology have fully benefited, leveraging their technological and production capacity advantages to seize global markets. Among them, leading companies have developed globally leading hollow-core optical fiber technology, successfully entering the supply chains of overseas technology giants such as Microsoft and Google. Global orders have further solidified the prosperity of the optical fiber industry. Meanwhile, the global production capacity of the optical fiber industry is highly concentrated in China, with core technologies being independently controllable and free from external bottlenecks, giving the industry strong certainty of development – a core advantage that is irreplaceable for the optical fiber sector.
In contrast, while the short-term price increase of electronic fabric is not as impressive as that of optical fiber, its price increase logic has greater long-term value in terms of demand resilience, growth potential, and industry cycle, making it a core sector with hidden potential.
As a core raw material for PCB circuit boards, electronic fabric has downstream applications in multiple fields such as new energy, consumer electronics, high-end servers, and artificial intelligence. Relying on the huge demand in the PCB market, its demand base far exceeds that of optical fiber, ensuring a stable industry foundation and long-term stable consumption support. In addition, electronic fabrics possess two core strengths, building a robust barrier for long-term growth. First, the benefits of technological iteration are being fully realized. With the upgrade of AI servers and high-end computing hardware, the performance requirements of downstream substrates-high frequency, high speed, and low dielectric-continue to rise. New-generation high-end electronic fabrics such as M8 and M9 have become industry necessities, and technological upgrades are driving industry iteration. Only companies mastering core technologies such as advanced processes, ultra-thin weaving, and low-dielectric formulations can seize market share in the high-end market. Honghe Technology has deeply cultivated the ultra-thin electronic fabric field, breaking the long-term monopoly of overseas companies, and its products have passed authoritative certifications from NVIDIA and TSMC. China Jushi, leveraging its global fiberglass leader advantage, accounts for 23% of the global electronic fabric production capacity, leading in both capacity and technology, and fully enjoying the benefits of industry upgrades.
Second, domestic substitution opens up trillions of yuan in growth potential. Currently, high-end electronic fabrics and supporting core raw materials still heavily rely on the monopoly of overseas companies, leaving a huge gap in domestic substitution. With domestic enterprises continuously increasing their R&D investment, companies such as Sinoma Science & Technology and Taishan Fiberglass are making breakthroughs in core technologies for low-dielectric electronic fabrics. Their products are compatible with the H100 series of high-end AI servers, gradually achieving import substitution in high-end fields. Domestic substitution, as a long-term core theme of the manufacturing industry, will continue to empower the electronic fabric industry, opening up long-term growth potential.
Looking at the two tracks in general, their industrial advantages have different focuses, and their development logics are completely different.
The fiber optic track excels in short-term certainty and technological self-control. Global production capacity and core technologies are firmly in the hands of domestic enterprises, and the demand for computing power continues to materialize, resulting in outstanding short-term performance. However, it should be noted that the current fiber optic industry's prosperity has been fully released, the valuation of leading companies has returned to a reasonable range, the previous market dividends have been largely realized, and the subsequent upward elasticity will contract, with the overall industry entering a stable development phase.
The electronic fabric track excels in perpetual demand, accelerated technological iteration, and vast potential for domestic substitution. With the resonance of these three logics, the industry's prosperity is still in the early stages of an upward trend. Leveraging the essential foundation of PCB manufacturing, coupled with the ongoing upgrades to high-end products and import substitution, the industry boasts ample long-term growth potential, making it a high-quality investment direction for the long term.
Amidst the ever-changing tides of industry development, short-term market trends are driven by supply and demand, while long-term growth hinges on fundamental logic. Fiber optics are suitable for investment strategies prioritizing stability and short-term certainty, while electronic fabrics, with their technological barriers and the support of domestic substitution, are better suited for long-term value investing. Understanding the underlying logic of these two material sectors is crucial to keeping pace with industry development trends and seizing long-term opportunities.
